Or are we in the new paradigm

Where is the 1X income option?

BlackVault CM - 27 January 2009 09:37 PM

Where is the 1X income option?

We will all be lined up at the local soup line if that happens.

Define “someone”.

SoCal78 - 27 January 2009 09:45 PM

Define “someone”.

Breathing living and not a Panda.

OC was never even at 3 times I thought.  I thought our historic norm is something like 4.2 times gross income.  I’ll be happy if we just get back to 4

24inIrvine - 27 January 2009 10:34 PM

OC was never even at 3 times I thought.  I thought our historic norm is something like 4.2 times gross income.  I’ll be happy if we just get back to 4

You are correct.  It’s low 4s.  4.2 or 4.4 sticks out in my head with an occasional pop to 4.7.  I’d have to look at my data.  I think it also peaked around 8s? Damn wish I had the figures with me…curious.
The median household income is also around 110K or so.  However, I want to know 2008’s figure because a lot has changed and is probably much lower.

BV, this may not be the exact data you are looking for but I remember me and Graph talking about it last year:

http://www.irvinehousingblog.com/forums/viewthread/2519/

Grabbed from the 07 Chapman Forecast ” Ratio of home prices to median family income increased from 4.0 to as high as 9.4 in OC by late 2005. ”  I remember it getting down to like 5 or 6 something in 07

I lended IR’s book to a friend so I don’t have the data, but I believe it was 10.6 in 2006 or something. 

Do we have the latest median income for OC?  we know the latest median house is 397,000

In the 90’s I went to a 6 week first time buyers seminar and learned the 3x rule. The seminars were held by two buyer’s agents who recommended no more than 3x your income and never, ever get anything but a fixed rate mortgage (I always wonder if they changed their tune when the fake money started flowing to everyone). But anyway, this rule always echoed in my head, I just couldn’t seem to forget it. In 2005 my nanny bought a 545K Santa Ana shack with 30K documented income so I started searching for what the hell could possibly be going on. That was the most extreme example but among friends and family I found so many others that really just made no sense to me and my naive little 3x rule I had in my head. That’s when I found the IHB and read everything I could (I’m still very thankful for this site because it was one of very few that were predicting anything close to what is happening how). It would be interesting to see exactly when the first companies/banks started veering away from any recognizable formula that involved yearly income and qualifying amount. There is no way that they could have been using any rule in this regard when qualifying people for loans. As far as returning to 3-4 times, I’m not sure if we’ll see that again. I agree with others here that we will either see (or should see) rental parity become a part of the equation (if anyone learns anything from this mess).

The 3x income was also vogue during the time when there were very little adjustable loans and fixed rates were 10% (or higher).

Now that fixed rates are 4-4.5%... you could probably go 4-5x… but Irvine housing is still above that.

irvine_home_owner - 28 January 2009 12:33 AM

The 3x income was also vogue during the time when there were very little adjustable loans and fixed rates were 10% (or higher).

Now that fixed rates are 4-4.5%... you could probably go 4-5x… but Irvine housing is still above that.

All this confuses the point.  which is:  25-30% of income towards housing is the most that is sustainable for most people, given other debt service (cars/edu/etc), savings and retirement needs.

freedomCM - 28 January 2009 12:37 AM

irvine_home_owner - 28 January 2009 12:33 AM

The 3x income was also vogue during the time when there were very little adjustable loans and fixed rates were 10% (or higher).

Now that fixed rates are 4-4.5%... you could probably go 4-5x… but Irvine housing is still above that.

All this confuses the point.  which is:  25-30% of income towards housing is the most that is sustainable for most people, given other debt service (cars/edu/etc), savings and retirement needs.

I agree… and I would like to add just using “price” is also confusing since factors like down payments, interest rates, HOAs, taxes (ie other “housing” expenses as you said) are not factored into price.

irvine_home_owner - 28 January 2009 12:57 AM

freedomCM - 28 January 2009 12:37 AM

irvine_home_owner - 28 January 2009 12:33 AM

The 3x income was also vogue during the time when there were very little adjustable loans and fixed rates were 10% (or higher).

Now that fixed rates are 4-4.5%... you could probably go 4-5x… but Irvine housing is still above that.

All this confuses the point.  which is:  25-30% of income towards housing is the most that is sustainable for most people, given other debt service (cars/edu/etc), savings and retirement needs.

I agree… and I would like to add just using “price” is also confusing since factors like down payments, interest rates, HOAs, taxes (ie other “housing” expenses as you said) are not factored into price.

Income alone is just as confusing, and only represents people that live paycheck to paycheck.  Keep in mind the asian demographic in Irvine has increased considerably and they tend to have little to no documented income.  As I have said before, amount of available liquid cash would be a better indicator.

Ah yes, the Phantom FCB!